Virgin Australia: first in Asia to collapse over coronavirus impact.

Dhaka: Virgin Australia Holdings Ltd became the first airline in Asia to fall victim to the coronavirus as the pandemic cost the debt-burdened company of almost all income.

Administrators at Deloitte, who have taken control of the Brisbane-based carrier, aim to restructure the business and find new owners within months. More than 10 parties have expressed an interest, Deloitte said on April 21.

Virgin Australia joins FlyBe — the UK’s biggest domestic airline before it collapsed last month — among the industry’s corporate casualties of the virus. Airlines have been pummeled by domestic and international travel bans that forced them to seek government aid.

Virgin Australia, which has furloughed 80 per cent of its 10,000 workers, will continue to operate some flights for essential workers, freight and the repatriation of Australians. The airline’s frequent flyer programme is a separate company and is not in administration.

The fate of Virgin Australia, which had more than USD 3.2 billion in debt as of the end of 2019, hung in the balance after it stopped virtually all services because of the virus and its request for state help failed. The company had asked the government for a USD 860 million loan, convertible into equity, to see it through the crisis.

Instead, the government called on the airline’s shareholders to step in. Virgin Australia’s final plea for USD 127.8 million in state aid was rebuffed on April 20, Paul Scurrah, Chief Executive Officer of the airline said on April 21.

Almost entirely owned by foreign airlines, Virgin Australia is a unique experiment in aviation. Singapore Airlines Ltd, Etihad Airways PJSC, HNA Group Co and Nanshan Group Co each own about 20 per cent of the company. Richard Branson’s Virgin Group owns about 10 per cent.

In a letter to Virgin staff on April 20, Richard Branson said his airlines in the UK and Australia would not survive the crisis without state support. Branson said he’s doing everything possible to keep Crawley, England-based Virgin Atlantic Airways Ltd afloat, but it needs a UK-backed loan to ride out the storm.

A voluntary administrator is usually appointed by directors after they decide the company is insolvent or nearing insolvency. Virgin Australia had about USD 855 million in cash at the end of 2019. The airline is dominated by Qantas in essentially a two-player market in Australia and has not made an annual profit for seven years.

Qantas shares jumped as much as 7.2 per cent on April 21 before paring all gains to close unchanged.

While governments in the US and across Europe have stepped in with support, or said they intend to, the Australian government baulked at potentially owning a stake in a money-losing domestic airline. Ministers repeatedly said their goal is to have two competing airlines in Australia, though stopped short of singling out Virgin Australia for any special help.

Virgin Australia’s stock was suspended earlier this month while restructuring talks continued. The shares last traded at less than 9 Australian cents apiece on April 4, valuing the company at almost USD 460 million.

Nicholas Moore, a former CEO of Macquarie Group Ltd, will engage with the administrator on behalf of the Australian government to find a “market-led solution” to Virgin’s crisis, Treasurer Josh Frydenberg said on April 21.